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Archived — Competition Bureau Uncovers Gasoline Cartel in Quebec

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Backgrounder

June 12, 2008

The Investigation

As part of its active monitoring of Canadian retail gasoline markets, the Competition Bureau became aware of allegations of price-fixing at gas stations in Victoriaville, Quebec. The evidence gathered during the Victoriaville investigation led to further probes in other local markets in Quebec, namely Thetford Mines, Sherbrooke and Magog.

In conducting its investigation, the Bureau uncovered evidence of agreements between competitors to fix the price at the pump at which gasoline was sold to consumers. The evidence indicated that participants in the targeted markets carried out the conspiracy mainly by phoning each other to agree on the price of gasoline and about the timing of price increases, contrary to section 45 of the Competition Act.

While some of the accused operated under the name or "banner" of a major oil company, in these cases, the local operators of the gas stations were responsible for setting the final price at the pump.

A number of investigative tools were used, including wiretaps, searches and the Competition Bureau's Immunity Program. Following the execution of search warrants, corporations approached the Bureau to co-operate in the investigation. Under the Bureau's Immunity Program, the first party to disclose to the Competition Bureau an offence not yet detected or to provide evidence leading to the filing of charges may receive immunity from the Director of Public Prosecution of Canada as long as the party co-operates with the Bureau.

The Immunity Program provides a powerful incentive for persons involved in cartel agreements to come forward.

Cartels and the Competition Act

The Competition Bureau devotes considerable resources to investigating allegations that competitors have engaged in price-fixing, also referred to as cartel activity.

A cartel is an agreement between businesses not to compete with each other.

Under section 45 of the Competition Act, it is a criminal offence for two or more persons to enter into an agreement to prevent or lessen competition unduly, such as where competitors agree to fix prices, resulting in a significant impact on competition.

Participants in a cartel can be liable to imprisonment for a term not exceeding five years or to a fine not exceeding $10 million, or to a combination of both. Anyone who has suffered a loss or damages as a result of such a cartel may also initiate a private legal action against cartel participants to recover any damages suffered.

Detecting and stopping cartels is a top priority for the Bureau because price-fixing deprives consumers of the benefits of competition, such as competitive prices, choice and innovation. This activity is a fraud on the market.

The Competition Bureau currently has investigations under way examining price-fixing in a range of industries in markets across the country, including the retail gasoline market.

The covert nature of cartels makes their detection time-consuming and labour intensive. The Bureau has several tools at its disposal to combat cartels, including wiretaps and searches. Both of these are court-authorized tools. The Bureau may also use its Immunity Program.

The gasoline industry

The retail gasoline market is unique in that retailers usually post their prices on large street-side signs. Since retailers know that the majority of consumers are very sensitive to price, gasoline stations often strive to meet or beat their competitors' posted rates. As a result, competing retailers frequently charge similar or identical prices. Similar gasoline prices, or similar changes in the price of gasoline, do not necessarily indicate price-fixing. High prices are a concern under the Competition Act only when they are the result of anti-competitive conduct, such as price-fixing.

Additional information is available in the Consumer Fact Sheet on Gasoline Prices on the Competition Bureau's Web site.

The Competition Bureau

The Competition Bureau is an independent agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

Detecting and stopping cartels is the Bureau's top anti-trust priority. However, it is active in many other areas. For instance, the Bureau regularly investigates allegations of anti-competitive behaviour, such as abuse of a dominant position in a given market, and false and misleading advertising. It is also responsible for reviewing mergers to ensure they will not result in a substantial lessening of competition.

The Competition Bureau is a statutory advocate for competition and carries out studies to enable it to intervene before federal and provincial regulators to advocate in favour of greater reliance on market forces.

The Competition Bureau is a federal agency headquartered in Gatineau, Quebec. It has a staff of approximately 400 with offices in major cities across Canada.